Gauhati High Court
Texmaco Ltd. And Anr. vs North Eastern Electric Power ... on 11 August, 2003
Equivalent citations: (2005)1GLR485
Author: D. Biswas
Bench: D. Biswas
JUDGMENT D. Biswas, J.
1. Taxmaco Limited, a company incorporated under the Companies Act, 1956, having its registered office in Kolkata and one of the Directors thereof have filed this writ petition challenging the decision making process in the matter of finalisation and award of contract pursuant to the advertisement No. 13/99 (NIT) issued under No. NEEPCO/GM(C)/ CONTRACT/TRHEP-02 OF 1999-2000 inviting tenders for pre-qualification of contractors for international competitive bidding issued by the respondent No. 1 i.e. North Eastern Electric Power Corporation Limited, a Government of India Enterprise. Consequential orders have been sought for issuance of a writ of mandamus commanding the respondent No. 1 to award the contract in favour of the petitioner No. 1 and also for other reliefs enumerated in the writ petition.
2. The case of the petitioner Company in short is that it is a leading heavy engineering industrial unit in India with proven track record in the filed of design, manufacture, supply, transportation, erection and commissioning of hydro mechanical equipments in India and abroad and it has successfully carried out as many as five hydro-electric projects including two under the respondent No. 1. The petitioner Company submitted its pre-qualification bid giving all the data and information in the month of January 2000. After about 18 months, the respondent Corporation by the letter dated 18th July, 2001 informed the petitioner Company that its pre-qualification bid has been accepted and was asked to submit its willingness to participate in the final bid. Out of the 15 bidders who had participated at the pre-qualification stage, only 7 were found qualified to participate in the technical and price bids. Eventually, the petitioner Company and the respondent No. 3 submitted technical and price bids. The technical bid was opened by the respondent Corporation on 14th February, 2002 for evaluation. The respondent No. 1 wrote a letter on 31st May, 2002 to the petitioner Company and the Respondent No. 3 calling them to give an undertaking in a format forwarded along with the letter to the effect that the work will be carried out strictly as per specifications of the NIT. This, according to the petitioner, was clear indication that the technical bid of the petitioner Company was accepted. But eventually the petitioners could come to know that the technical bid of the respondent No. 3 only was accepted and the price bid submitted by the respondent No. 3 was opened. The price bid of the petitioner Company was not opened as it could not allegedly qualify in the technical bid. It has been further averred that the price quoted by the respondent No. 3 is Rs. 37.8 crores as against Rs. 36.061 crores quoted by the petitioner Company and, therefore, the respondent Corporation is bound to accept the tender of the petitioner Company.
3. The respondent Corporation in their affidavit filed on 24th February, 2003 submitted that the petitioners' technical bid was not accepted and no presumption to that effect could be drawn from the letter dated 31.5.2002 whereby the petitioner Company as well as the private respondent were asked to give an undertaking to prevent any deviation from the NIT specifications and price thereof. This had to be done since the respondent No. 3 had spelt out certain conditions which are likely to cast additional financial burden upon the Corporation and the said additional clauses were rejected on the basis of the undertaking obtained. The technical bid was initially evaluated by the respondent No. 2 and, thereafter by the Design cell of the Corporation. The petitioners' technical bid secured 61.70% in the evaluation done by the respondent No. 2 and the respondent No. 3 secured 91.84%. However, the Design Cell of the Corporation awarded 70.20% to the petitioner Company and 92.24% to the respondent No. 3. In view of the discrepancies in the evaluation, the Corporation again asked the Respondent No. 2 to review the technical bids once again. The result of the review by the respondent No. 2 would show that the petitioner Company secured 64.87% and the respondent No. 3 secured 91.94%. The evaluation report was placed before the Tender Purchase Committee of the NEEPCO and the Committee after detailed deliberation recommended that the price bid of the Respondent No. 3 alone be opened. The petitioner Company could not secure minimum qualifying marks of 70% in the technical bid and, therefore, no error was committed by the Corporation in not opening the price bid of the petitioner Company. The technical evaluation has been done as per provisions of the bid documents only and that the price bid was duly opened after obtaining clearance from the Hon'ble Delhi High Court by an order passed on 28.10.2002 in C.W. 1258 of 2002.
4. In addition to the above pleadings, the petitioner Company and the Corporation exchanged further affidavits on various issues. The respondent No. 3 also filed an affidavit in order to justify their suitability on merit. I have taken due care of the pleadings and also heard Mr. S. Pal, learned senior counsel for the petitioner Company, and Mr. P.K. Goswami and Mr. A.K. Bhattacharyya, learned senior counsel for the respondents.
5. The following questions are formulated to resolve the disputes raised in the writ petition :-
(1) Whether the undertaking was obtained fro the petitioner Company and the respondent No. 3 with a view to retrieve the technical bid of the respondent No. 3 which included additional conditions/ clauses and whether the undertaking could be interpreted as indication that the technical bid of the petitioner Company was accepted ?
(2) Whether the Corporation's decision not to open the price bid of the petitioner Company on the ground that his technical bid fell short of qualifying marks suffers from any vice of arbitrariness Let me first deal with the question No. 1. Clause 25.2(c)(iv) of the General Terms and conditions (Vol-1) reads as follows :
"(iv) Deviation from bid document/additional clauses :
(a) All bidders are cautioned that the bids containing any deviation wherever from the basic parameters in respect of General Terms and Conditions, Technical Specifications and the Tender Drawings as contained in the bid documents are liable for rejection.
(b) Acceptability/Non-acceptability of the deviation from the Contract General Terms and Conditions, Technical Specifications and the Tender Drawings as contained in the bid documents shall be judged by the Corporation. The deviations/additional clauses that are considered as acceptable same shall be dealt as per Sub-clause 25.3(iv), (a) and (b). The deviations/additional clauses which are non-acceptable by the Corporation shall automatically stand withdrawn and all relevant clauses shall prevail and no claim whatsoever in this respect shall be entertained. The Corporation shall be the sole judge for assessment of acceptability/non-acceptability of deviations/additional clauses. The decision of the Corporation in this respect shall be final. The evaluation of deviation and additional clauses as stated above shall be carried out along with the evaluation of priced proposal."
7. It would appear from above that the tenderers had the option to deviate or incorporate additional clauses which would be considered by the Corporation to judge their acceptability in accordance with the provisions of Sub-clause 25.3 (iv), (a) and (b). However, deviation has been prohibited from the basic parameters in respect of general terms and conditions, technical specifications and tender drawings. Sub-clause 25.3 (iv), (a) and (b) laid down the guidelines for determination of commercial loading in view of deviation/additional clauses within the permissible limit. Keeping in mind the provisions of the General Terms and Conditions (Vol. 1) reproduced above, we may now examine the scope and extent of the additional clauses/deviation incorporated in the tender document of the respondent No. 3.
8. Additional Clauses/deviation are as follows :
"Part-III Conditions of Contract We propose that the contract be divides as follows :-
(i) First contract; for CIF supply of all offshore equipment and materials,
(ii) Second contract : for Ex-works supply of all equipment and materials of Indian origin;
(iii) Third contract: for providing all onshore services in respect of all equipment supplied under both first and second contracts.".
"Add a new first sentence : "The Contractors shall be entitled to subcontract any part of the works to a sub-contractor identified in the Tender. The Contractors shall be entitled to subcontract works for standard components, or any other individual parts not exceeding 5% of the Contract Price to any sub-contractor without the prior consent of the Engineer in Charge."
"Compensation for Delay:
The compensation for delay as stipulated in Appendix -1 shall be to the exclusion of any other remedy of the Corporation in respect of the Contractor's failure to complete within the time for completion.
The item 25 shall be amended and liquidated damages shall be stipulated.".
"The Contractor's liability under the Contract shall be limited as follows :
(a) Contractor's aggregate liability for all causes shall not exceed 50% of the Contract Price.
(b) Other than those specific remedies stated in the contract, liquidated damages shall be Owner's sole remedy for Contractor's delay.
(c) Notwithstanding any other provision, neither party shall be liable to the other for any indirect, incidental or consequential damage whatsoever.".
9. The above additional clauses/deviations indicate that the respondent No. 3 suggested splitting of the contract into three instead of one as provided in the NIT, reservation of right to sub-contract any part of the work to a sub-contractor, besides other clauses for compensation, commencement of work and limitations on the contractor's liability. These additional clauses have not been accepted by the Corporation. As provided in Clause 25.2(c)(iv)(6) of Part-II of Vol-1 of the General Terms and Conditions, the deviations/additional clauses which are not accepted by the Corporation shall automatically stand withdrawn and only the relevant clauses shall prevail. Therefore, the additional clauses though incorporated in the tender document in deviation of the General Terms and Conditions have no importance in view of the provisions in Clause 25.2.(c)(iv)(b) of Part-II of Vol-1. Moreover, in order to ensure the interest of the Corporation, it was decided to obtain an undertaking from both the petitioner Company and the respondent No. 3 to the effect that the entire scope of the work shall be done strictly as per the technical specifications, approved designs, drawings and terms and conditions of the bid document and other terms and, conditions as maybe finalised during the pre-bid meeting and that any deviation and/or additional condition contained in the bid shall automatically stand withdrawn, if not accepted by the Corporation. There is obviously no deviation from the technical specifications, design and drawings as contained in the NIT. The additional clauses/deviations incorporated for consideration by the Corporation cannot be construed as an integral part of the basic tender document submitted by the respondent No. 3. Clause-7 of Part-Ill of Vol-1 of the General Terms and Conditions also provide for assessment and sub-letting with approval of the Engineer in Chief. This condition permits sub-letting of any part of the contract which is otherwise not substantial in nature. The concept of sub-letting cannot be said to be altogether out of context in view of the provisions of Clause-7, as referred to above. Clause -25 provides for compensation for delay, respondent No. 3 suggested some changes as additional conditions within the permissible limit of the General Terms and Conditions of the NIT. Similarly is the situation with regard to limitation of contractor's liability. The additional clauses and conditions offered by the respondent No. 3 were subject to scrutiny and acceptance by the Corporation. The material deviations, as per General Terms and Conditions, is one which affects in any way the prices, quality, quantity or completion schedule of work or which limits in any way the responsibilities of the bidder or any right of the Corporation. In the instant case, the technical bid of the respondent No. 3 has been cleared by the Technical Consultant, namely, Electrowatt Engineering Limited Zurich i.e. respondent No. 2 and also the internal Design Cell of the Corporation. The additional clauses/deviations offered were subject to acceptance by the Corporation. Provisions in 25.2 (c)(iv) quoted hereinbefore, take care of the additional clauses and deviations. Besides, undertakings have also been obtained from the bidders in order to protect the interest of the Corporation. This is an additional safeguard. Situated thus, this Court is not inclined to hold that the technical bid of the respondent No. 3 ought to have been rejected at the threshold. The opinion given by the expert consultant i.e. Electrowatt Engineering Limited Zurich and Design Cell of NEEPCO clearly suggest the competence and capability of the respondent No. 3 in executing the project of the like nature. The additional clauses/deviations suggested being separable from the basic tender documents will not have the effect of vitiating the bid offered by the respondent No. 3. True, a conditional offer is liable to rejection at the threshold. But if the conditions offered are separable by operation of other terms and conditions embodied in the NIT, such terms and conditions will not vitiate the bid as a whole. The observation of the Hon'ble Supreme Court in para-69 of Tata Cellular v. Union of India, (1994) 6 SCC 651 in such case will not be attracted. In this context it can be concluded that the undertaken obtained by the Corporation from the respondent No. 3 as well as the petitioner has no adverse impact in the given circumstances of the case at hand. The undertakings obtained from the parties were meant to secure the interest of the Corporation. Under no circumstances, it can be construed as an indication of acceptance of the technical bids of the parties.
10. The next question, whether the decision of the Corporation not to open the price bid of the petitioner Company on the ground that their technical bid fell short of the qualifying marks suffers from the vice of arbitrariness ? There cannot be any dispute that the Corporation is the final authority either to accept or reject the tenders including the technical bids. The Corporation has an expert cell of its own known as the "Design cell" in New Delhi. This Design Cell consisting of experts advise the Corporation on technical matters. The advice so tendered by the Design Cell is not binding on the Tender Purchase Committee or the Board. The TPC or the Board may, for reasons to be recorded in writing, differ with the opinion/views tendered by the Design Cell. The Design Cell awarded 70.20% out of 10 to the petitioner Company after evaluation of its technical bids. The minimum qualifying marks is 70%. The Design Cell awarded 92.24% to the respondent No. 3. As per evaluation of the Design Cell, both the petitioner Company and the respondent No. 3 Company secured more than minimum qualifying marks prescribed. Simultaneously, the technical bids were also forwarded to the Electrowatt Engineering Limited, Zurich, respondent No. 2, the Expert Consultant appointed by the Corporation as per terms and conditions given by the funding agency, namely, Japan Bank for International Co-operation, Japan. The Electrowatt Engineering Limited, Zurich evaluated the technical bids of the petitioner and the respondent No. 3, and awarded 61.70% to the petitioner and 91.84% to the respondent No. 3. Apparently there has been a difference of opinion between the Design Cell of the Corporation and the Expert Consultant, the respondent No. 2. The Corporation, therefore, forwarded the technical bid again to the Respondent No. 2 for review. The respondent No. 2, after review reiterated its earlier opinion with marginal variation in the marks. Even during review by respondent No. 2, the petitioner Company could not secure the minimum qualifying marks. Mr. S. Pal, learned counsel for the petitioner argued that there is no provision in the NIT for referring the matter for review and, as such, the matter should not have been referred to the respondent No. 2 again for opinion. Besides, Shri Pal argued that there being difference between the two expert consultants, it was obligatory on the part of the Corporation, either to accept the opinion of the Design Cell which cleared both the bidders, or to refer the matter to a third consultant. Under no circumstances, the respondent No. 2 could be expected to act in reveals of their earlier opinion, however grave the reasons might be.
11. Scrutiny of the general terms and conditions of tender would show that there is no provision for review of the opinion tendered by the Experts and, therefore, it was not proper on the part of the Corporation to refer the matter to the respondent No. 2 for review of its' own decision. respondent No. 2 is not a body above the Design Cell of the Corporation and, as such, its opinion cannot substitute the opinion of the Design Cell except for reasons to be recorded in writing by the Corporation. The respondent No. 2 could not be accepted as the best judge in a matter where its own opinion was under reconsideration. The confusion arose because of the divergent views given by the experts, and as such, in all fairness, if the review was at all considered indispensable, it should have been by a third Consultant.
12. In this context, it is considered necessary to refer to the decison of the Tender Purchase Committee and the Board. There is no controversy that the agenda prepared for the TPC meeting contain all the material facts necessary for consideration. Annexure-VIII of the TPC agenda contains the comparative statement. It may be pertinent to quote herein below the observation of the General Manager (C) Contracts :-
"From the composite statement as prepared by M/s EWE it is observed that M/s Alstom Power had qualified for Price Bid as per the assessment of both Design Cell, NEEPCO Ltd and M/s EWE. However, M/s Texmaco had failed to secure the minimum overall qualifying marks as per M/s EWE, whereas the firm had qualified as per Design Cell, NEEPCO Ltd. (photocopy of the composite statement is enclosed at Annexure-VII).
As there is difference in opinion regarding eligibility of M/s Texmaco to qualify for Price Bid, a Comparative Statement is prepared and enclosed at Annexure-VIII. Observations of both Design Cell. NEEPCO Ltd and M/s EWE had been examined and found to be identical, whereas different markings are given. While going through the details of sumittals by M/s Texmaco it is observed that M/s Texmaco has failed to provide sufficient requisite information as sought for under various components. In spite of these deficiencies, minimum qualifying marks had been provided to M/s Texmaco by both Design Cell. NEEPCO Ltd and M/s EWE. It is further observed that M/s Texmaco has marginally qualified as per Design Cell. NEEPCO Ltd. in spite of the fact that 50% marks had been awarded although the firm had failed to provide requisite information.
Put up to T.P.C. for discussion and decision please."
13. Annexure-VIII is the comparative statement in respect of the technical bid of both the parties which is quoted below :-
ANNEXURE - VIII ____________________________________________________________________________________ Components Max. Evaluation by NEEPCO Evaluation By M/s EWE Marks (Revised) (Screen) Marks Percentage Marks Percentage Obtained Obtained (1) Bidder 5 3.3 66% 3.1 62% appreciation (2) Personal 9 9 100% 9 100% Capabilities (3) Available in 5 4.2 84% 3.2 64% house fabrication facilities (4) Site 54 80% 3.7 74% Organisation (5) Preliminary 50 32.6 65.2% 30.98 61.96 Design & Drawing (6) Quality 5 2.5 50% 2.5 50% Assuance (7) Fabrication & 13 9.1 70% 7.8 60% Erection Procedure (8) Work 5 4 80% 3 60% Programme (9) Safety 3 1.5 50% 1.5 50% Procedure Total 100 70.2 64.78 _____________________________________________________________________________________
14. It would appear that the General Manager (C) Contracts in the TPC Agenda, quoted above, has observed that despite identical observations of both the Design Cell and the Electrowatt Engineering, marks given were different. This is a very significant matter which should have been examined by the Tender Purchase Committee. The evaluation report (Annexure-IV) and the Check List of the bid documents available at Annexure-V indicate the perfection/ completeness of the bid documents. These two important documents required micro level examination by the TPC. This Court is not posted within the technical expertise necessary to re-evaluate the reports given by the expert consultants. In this context, we may refer to the decision of the TPC taken on 3.12.2002 in order to determine the extent of application of mind. The resolution reads as follows :-
"AGENDA No. 25/2002"TENDER FOR HYDRO-MECHANICAL EQUIPMENT (LOT-IV) UNDER TUIRIAL HYDRO ELECTRIC POWER STATION PROJECT, MIZORAM, INDIA"
The agenda was presented and explained by GM(C), Contract and after detailed deliberation TPC resolved that the price bid of M/s Alstom Power is to be opened considering the comments given by our review consultant M/s EWE.".
15. The above resolution shows that the TPC did not envisage any scrutiny as was required in the context of the case. It relied upon the presentation of the General Manager (C), Contracts and took the resolution to open the price bid of the private respondent only. How did the General Manager (C) Contracts explained his observation in Annexure-VIII about the variation in the marks awarded despite identical observations is not available in the decision of the TPC. In my opinion, the TPC has acted without application of mind to the matters in controversy. There is nothing in the proceedings of the TPC to show that the TPC has taken the decision diligently after addressing the important aspects involved in the decision making and this omission on their part warrants interference by this Court {Sterling Computers Limited v. M. & N Publication Limited and Ors., (1993) 1 SCC 445]. The necessity of consulting M/s Electrowatt Engineering at the instance of the funding agency cannot be an excuse for ignoring the opinion of the Design Cell. That apart, there must be reasons for rejection which, unfortunately, are not available in the proceedings. In my opinion, in the given circumstances of the case, there is no option on the part of the Corporation but to accept the technical bid of the petitioner Company and open its price bid. The observation of the Hon'ble Supreme Court in para-12 of the judgment in Union of India and Ors. v. Dinesh Engineering Corporation and another, (2001) 8 SCC 491 may be relied upon in support of this conclusion. The Supreme Court ruled that:-
".....Any decision, be it simple administrative decision or a policy decision, f taken without considering the relevant facts, can only be termed as an arbitrary decision. If it is so, then be it a policy decision or otherwise, it will be violative of the mandate of Article 14 of the Constitution."
16. The Board in its meeting held in New Delhi on 18.2.2003 also laid emphasis on the evaluation report submitted by the respondent No. 2, M/s Electrowatt Engineering Limited. The Board did not record any reason as to why the opinion tendered by its Design Cell was not worth accepting. It laid much emphasis on delay in execution of the project and swept by the idea that re-tendering would cause further delay. These are, in my opinion, no grounds relatable to the question raised on the propriety of the rejection of the petitioners' technical bid. Even if the petitioner Company failed to provide all the required information under various components, the marks secured by it on totality from the Design Cell ought to have been given due consideration. But there is nothing in the proceeding of the Board that any such exercise was undertaken before refusing to act on the evaluation report submitted by the Design Cell. The Board apparently toed in the line of the TPC and resolved to award the contract in favour of the private respondent after negotiation. The decision of the Board does not salvage the situation since it suffers from the same vice of arbitrariness and non-application of mind.
17. Situated thus, the Corporation should have accepted the technical bid of the petitioner. It is not understood as to why the Corporation wanted to sideline the petitioner Company from the competition and go ahead with the offer of the respondent No. 3 alone. Acceptance of the technical bid of the petitioner which secured 70.20% at any point of time does not mean that the contract has to be awarded in its favour, even if its' price bid is lower. The observation of the Hon'ble Supreme Court in para-70 in Tata Cellular (supra) makes the position more clear. It reads :-
"70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotations. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.".
18. The Hon'ble Supreme Court in the above judgment ruled that the right to refuse the lowest or any other tender is always available with the Government. The question of infringement of Article 14 will not arise if the Government tries to get the best person or the best quotation. This being the law in force, the Corporation should have accepted the valuation report of the Design Cell and opened the price bid of the petitioner Company also. Opening of the price bid of the petitioner Company would not have in any way bind the Corporation to award the contract with it even if its price bid is lower. The Corporation have the powers to go for the best offer on consideration of technical excellence, price bid being negotiable.
19. The sum and substance of the different judgments relied upon by the parties relate to the power of judicial review of the Court, limited to the examination of decision making process only. The Court is not authorised to substitute its own views. In Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corporation and Ors., (2000) 5 SCC 287, the law has been summed up as follows :
"(i) The Government is free to enter into any contract with citizens but the court may interfere where its acts arbitrarily or contrary to public interest.
(ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate.
(iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons.".
20. In my opinion, the decision making in the instant case suffers from the vice of arbitrariness in the sense that the TPC and the Board have not recorded any reason for not accepting the report given by its Design Cell. Therefore, a thorough evaluation is felt necessary by the Corporation in order to determine as to which of the two offers is better. Decision in this behalf has to be taken afresh after opening the price bid of the petitioner Company.
21. In the result, the writ petition is allowed. The Corporation is directed to open the price bid of the petitioner Company and, thereafter, to take a decision in the matter with due application of mind. The Corporation's powers to accept the best offer are to be exercised keeping in mind the observation of the Hon'ble Supreme Court in the Tata Cellular and Monarch Infrastructure (P) Ltd. (supra). The stay order passed on 24.2.2003 stands merged with this final order.
22. Cost easy.